02/14/2008 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB303 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 303 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 14, 2008
1:09 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Chair
Representative Nancy Dahlstrom, Vice Chair
Representative John Coghill
Representative Bob Lynn
Representative Ralph Samuels
Representative Max Gruenberg
Representative Lindsey Holmes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 303
"An Act relating to marine products and motorized recreational
products; and providing for an effective date."
- MOVED CSHB 303(JUD) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 303
SHORT TITLE: MARINE & MOTORIZED RECREATIONAL PRODUCTS
SPONSOR(S): REPRESENTATIVE(S) NEUMAN
01/11/08 (H) PREFILE RELEASED 1/11/08
01/15/08 (H) READ THE FIRST TIME - REFERRALS
01/15/08 (H) L&C
01/30/08 (H) L&C AT 1:00 PM CAPITOL 17
01/30/08 (H) Moved CSHB 303(L&C) Out of Committee
01/30/08 (H) MINUTE(L&C)
01/31/08 (H) L&C RPT CS(L&C) 4DP 3AM
01/31/08 (H) DP: BUCH, RAMRAS, NEUMAN, OLSON
01/31/08 (H) AM: GARDNER, LEDOUX, GATTO
01/31/08 (H) JUD REFERRAL ADDED
02/06/08 (H) JUD AT 1:00 PM CAPITOL 120
02/06/08 (H) Heard & Held
02/06/08 (H) MINUTE(JUD)
02/11/08 (H) JUD AT 1:00 PM CAPITOL 120
02/11/08 (H) <Bill Hearing Canceled>
02/13/08 (H) JUD AT 1:00 PM CAPITOL 120
02/13/08 (H) Heard & Held
02/13/08 (H) MINUTE(JUD)
02/14/08 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
REPRESENTATIVE MARK NEUMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 303.
REX SHATTUCK, Staff
to Representative Mark Neuman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of the sponsor, Representative
Mark Neuman, provided comments and responded to questions during
HB 303.
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during discussion of
HB 303.
CRAIG COMPEAU, Owner
Compeau's Marine
Fairbanks, Alaska
POSITION STATEMENT: Provided comments and responded to
questions during discussion of HB 303.
ACTION NARRATIVE
CHAIR JAY RAMRAS called the House Judiciary Standing Committee
meeting, which had been recessed on February 13, 2008, back to
order at 1:09:06 PM. Representatives Coghill, Samuels, Lynn,
Gruenberg, Dahlstrom, and Ramras were present at the call back
to order. Representative Holmes arrived as the reconvened
meeting was in progress.
HB 303 - MARINE & MOTORIZED RECREATIONAL PRODUCTS
1:09:30 PM
CHAIR RAMRAS announced that the only order of business would be
HOUSE BILL NO. 303, "An Act relating to marine products and
motorized recreational products; and providing for an effective
date." [Before the committee was CSHB 303(L&C), and adopted as
a work draft on 2/13/08 was the proposed committee substitute
(CS) for HB 303, Version 25-LS1183\K, Bannister, 2/13/08.]
1:11:01 PM
REPRESENTATIVE MARK NEUMAN, Alaska State Legislature, sponsor,
mentioned that he intends to keep working on HB 303 as concerns
arise.
The committee took an at-ease from 1:11 p.m. to 1:14 p.m.
REPRESENTATIVE HOLMES, in response to Chair Ramras, stated that
although she'd been considering an amendment, she is not yet
ready to offer one. She characterized HB 303 as well
intentioned, though perhaps overly broad.
REPRESENTATIVE GRUENBERG expressed a desire to continue to work
on HB 303 as it moves through the process.
CHAIR RAMRAS surmised that HB 303 addresses some significant
needs and protections, particularly for those who reside in
rural areas of the state who purchase motorized equipment.
However, he cautioned that the legislature must consider HB 303
carefully since it may raise some anti-trust and constitutional
issues.
REPRESENTATIVE LYNN expressed concern that HB 303 will affect
private contracts. He acknowledged that consumers need adequate
service on products, and that dealers need to be able sustain
their businesses. He offered his belief that HB 303 may need
some additional work.
REPRESENTATIVE SAMUELS said that although HB 303 attempts to
address an existing problem, he is reluctant to tamper with
contractual agreements between parties without understanding the
nature of the agreements. He said that he doesn't believe that
HB 303 will provide a remedy for dealers because dealers' costs
are generally passed onto consumers, and surmised that any
additional costs to manufacturers will ultimately be passed onto
consumers, too. He stated that he is happy that the
constitutional issues that had been identified were being
addressed.
REPRESENTATIVE NEUMAN explained that the intention of HB 303 is
to offer consumer protection, but acknowledged that there might
be some issues that may still need to be addressed.
CHAIR RAMRAS said he is focusing on the role of state government
with respect to private contracts between manufacturers and
dealers.
REPRESENTATIVE HOLMES asked whether HB 303 is patterned on
either model legislation or on a specific state's legislation.
1:28:27 PM
REX SHATTUCK, Staff to Representative Mark Neuman, Alaska State
Legislature, relayed on behalf of Representative Neuman,
sponsor, that some elements of HB 303 are based on model law,
some are modeled after AS 45.25, some were suggested by the
Marine Retailers Association of America (MRAA), and some were
modeled after similar laws in other states.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.020 -
Consent to transfer of agreement - and said that language seems
to be what she called "a forced assignment clause." She asked
whether similar language exists in either Alaska's Uniform
Commercial Code (UCC) or other areas of law.
1:30:02 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), offered his understanding that similar
language can be found under AS 45.25, perhaps AS 45.25.120 or AS
45.25.130.
REPRESENTATIVE GRUENBERG pointed out that those statutes don't
contain any such language.
MR. SHATTUCK offered his understanding that similar language can
be found in [Alaska's] UCC.
REPRESENTATIVE HOLMES referred to proposed Article 2 - Area of
Responsibility - surmised that some provisions of HB 303 attempt
to fix problems that may not exist, and expressed concern about
potential antitrust issues.
1:32:37 PM
CRAIG COMPEAU, Owner, Compeau's Marine, stated that in the past
the dealer's area of responsibility has been a problem. Some
provisions were inserted in HB 303 to help ensure that problems
other states have experienced don't become issues in Alaska. He
offered that when a manufacturer assigns a new dealer to an
existing area, it adversely impacts the existing dealer who has
made a huge investment to build and maintain a facility. He
pointed out that these provisions are intended to provide
disincentives for unfair practices by manufacturers.
REPRESENTATIVE SAMUELS asked whether dealer agreements restrict
the distance between dealers and whether that is an appropriate
way to alleviate the problem.
MR. COMPEAU explained that the dealer agreements in Fairbanks
allow for an area of responsibility of 30 miles, and offered his
understanding that the dealer agreements in Anchorage allow for
an area of responsibility of 12 miles.
1:35:24 PM
MR. SHATTUCK indicated that although areas of responsibility are
often set out in the dealer's agreement, proposed AS 45.27.100
provides that if the dealer's agreement doesn't establish a
smaller area of responsibility, then the area of responsibility
may be a geographical area designated by zip code, municipality,
or mileage radius; and that if either there is no area of
responsibility established in the dealer's agreement or the
dealer rejects the area set out by the manufacturer/distributor,
the area of responsibility shall be within a 12-mile radius [of
the dealership in municipalities with 4,000 or more people], and
within a 30-mile radius [of the dealership in municipalities
with fewer than 4,000 people]. He characterized this provision
as setting up reasonable guidelines in instances where the area
of responsibility has not been addressed by contract.
REPRESENTATIVE HOLMES questioned whether this provision raises
any anti-trust issues.
MR. SNIFFEN first clarified that the statute prohibiting
manufactures from denying transfer of a car dealership is AS
45.25.170, and then offered his understanding that anti-trust
issues are somewhat avoided because the language in subsection
(a) allows manufacturers to set the area of responsibility in
the dealer's agreement. With regard to automobiles, dealerships
often don't sell more than one make of car, so it doesn't matter
if another dealer across the street, for example, sells another
make of car. However, he offered his understanding that while
ATV dealers are generally limited to one brand of ATV, many
"marine dealers" sell multiple brands. If multiple brands are
sold by a single dealer, then anti-trust issues might become
more of a concern; furthermore, manufacturers may not like
having their brand sold in dealerships that also sell other
brands. So although he didn't think that the language in
Version K would actually raise an anti-trust issue, the
potential does exist.
REPRESENTATIVE DAHLSTROM asked whether a dealer who sells one
brand such as Arctic Cat could offer to take another brand in as
a trade-in, and subsequently resell the other brand that they
don't normally carry.
1:41:42 PM
MR. SNIFFEN said that in the automotive realm he thought that
generally dealers can sell any used products; when a dealer
enters into an agreement, it only applies to new products, with
the used product market being fairly fungible.
MR. COMPEAU concurred that a lot of dealers will take other
brands as trade-ins, although his company limits trade-ins to
the brand of product that he carries.
REPRESENTATIVE DAHLSTROM related her own experiences and opined
that purchasing recreational vehicles and automobiles are
totally different experiences.
MR. SNIFFEN acknowledged that his Commercial/Fair Business
Section does not receive as many complaints from consumers on
marine and recreational vehicles such as snowmobiles as it does
on automobiles. Thus, his office has more familiarity with
automobile industry issues than with issues surrounding marine
and other recreational vehicles such as ATVs.
REPRESENTATIVE HOLMES asked whether proposed AS 47.27.100(c),
which requires manufacturers and distributors to adopt uniform
procedures to establish areas of responsibility is feasible.
MR. COMPEAU answered that he thought so since the data required
by subsection (c) is readily available and would provide good
information for the dealer and the manufacturer.
REPRESENTATIVE COGHILL pointed out that under proposed AS
45.27.100(a), an area of responsibility "may" be established by
the uniform procedures adopted under subsection (c), but
subsection (c) says that the manufacturer or distributor "shall"
adopt uniform procedures to establish an area of responsibility.
Thus this language needs to be clarified, he surmised.
CHAIR RAMRAS questioned whether proposed AS 45.27.100(c) should
be deleted.
REPRESENTATIVE HOLMES agreed that deleting subsection (c) might
be warranted.
1:49:12 PM
CHAIR RAMRAS made a motion to adopt Conceptual Amendment 1, to
delete subsection (c) from page 2, lines 25-29, and make
conforming language changes. There being no objection,
Conceptual Amendment 1 was adopted.
REPRESENTATIVE SAMUELS asked who sets the price of the product
being sold.
MR. COMPEAU offered that the manufacturer sets a suggested
retail price, but the dealer is not limited to that since the
manufacturer's suggested retail price does not take into account
any of the dealer's freight charges and handling fees. In
response to another question, he explained that the manufacturer
remits a fixed flat rate to the dealer for warranty repairs.
REPRESENTATIVE COGHILL surmised that at issue are two points:
how a dealer can charge the customer for services; and how the
manufacturer will reimburse the dealer for those services.
REPRESENTATIVE GRUENBERG referred to proposed AS 45.27.030,
which addresses giving notice by mail. The parties may wish to
use electronic means to provide notice, but the term "mail" is
defined in proposed AS 45.27.990(10) to means registered or
certified mail, return receipt requested. He said he would like
the bill to also allow for electronic notification.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.230 - Sale
after termination or nonrenewal - and asked whether the
manufacturer or distributor would still be required to provide
parts for products afterwards even if a dealer's agreement is
being terminated "for cause."
REPRESENTATIVE GRUENBERG noted that such a requirement could put
the manufacturer or distributor at financial risk if the
dealership was being shutdown for financial reasons, because
then those parts could be seized by a creditor.
MR. SHATTUCK indicated that that provision is meant to ensure
that the consumer can continue to receive service even after a
dealer's agreement is terminated - the dealer relationship with
the manufacturer with regard to parts would continue until
either the manufacturer establishes a new dealership or within
24 months, whichever happens first.
REPRESENTATIVE HOLMES opined that proposed AS 45.27.230 needs to
be clarified with regard to when it applies. For example, what
types of terminations would warrant requiring the manufacturer
or distributor to continue to provide parts.
MR. SHATTUCK noted that proposed AS 45.27.220 specifies that a
manufacturer or distributor may not refuse to deliver or ship a
product without just cause.
REPRESENTATIVE HOLMES pointed out that that doesn't address
proposed AS 45.27.230.
1:58:11 PM
REPRESENTATIVE GRUENBERG noted that the term, "just cause" isn't
defined, and cautioned that a contractual agreement could
contain a provision to define "just cause" to mean whatever one
wants, thus circumventing the proposed law.
REPRESENTATIVE HOLMES reiterated that proposed AS 45.27.230 does
not include the words "just cause".
REPRESENTATIVE NEUMAN said the goal of this provision is to
ensure that a dealer will continue to be able to provide
warranty repairs until such time as the manufacturer or
distributor enters into an agreement with another dealer who can
then provide service to the first dealer's customers.
REPRESENTATIVE HOLMES relayed that she is still concerned with
proposed AS 45.27.230.
CHAIR RAMRAS surmised that her concern is that proposed AS
45.27.230 forces the manufacturer or distributor to continue to
have a relationship with the dealer.
REPRESENTATIVE HOLMES concurred; a manufacturer or distributor
may have a very good reason for terminating an agreement with a
dealer, and this provision doesn't take that into account.
REPRESENTATIVE GRUENBERG surmised that if the dealer is in
bankruptcy or goes out of business, this provision essentially
forces the manufacturer to set up its own dealership.
2:01:31 PM
CHAIR RAMRAS relayed that his intent is to clean up some of the
nebulous aspects of Version K, as well as those provisions that
put pressure on the manufacturer/distributor.
REPRESENTATIVE SAMUELS posed a scenario in which the dealer has
not been paying the manufacturer or distributor for the products
and parts. Under proposed AS 45.27.230, the manufacturer or
distributor must still keep sending the dealer parts. He said
he agrees with the intent of proposed AS 45.27.230, which is to
offer consumer protection.
CHAIR RAMRAS emphasized that they need to be fair to the
manufacturers as well.
MR. COMPEAU said that because the intent of this legislation has
always been to provide consumer protection, it is hard to
consider the manufacturer/distributor's view point. He surmised
that the provision, which was suggested by the DOL, in proposed
AS 45.27.230 limiting the continuance of the dealer's
relationship with regard to providing parts to either just 24
months or to when an agreement is entered into with another
dealer will provide an incentive to the manufacturer to
establish another dealer. He offered his belief that once a
dealer is bankrupt, he/she will no longer be able to purchase
parts from the manufacturer/distributor, and so proposed AS
45.27.230 would not apply.
REPRESENTATIVE GRUENBERG acknowledged that proposed AS 47.27.230
doesn't require the manufacturer/distributor to sell the dealer
parts if he/she has gone out of business, but again pointed out
that it still puts the manufacturer/distributor at great risk
because it could be argued that the manufacturer might be
required to sell products to a dealer even when the dealer's
credit is no good.
MR. COMPEAU said manufacturers often place dealers on cash on
delivery (COD) status.
REPRESENTATIVE GRUENBERG argued, though, that the bill requires
the manufacturer to sell the dealer parts regardless of whether
the dealer can pay for them. He pointed out that the bill
doesn't address who is allowed to make final decisions in the
event of a dispute between the manufacturer/distributor and the
dealer; litigation is costly and HB 303 does not provide
provisions for arbitration.
CHAIR RAMRAS questioned whether proposed AS 45.27.230 should
simply be removed.
REPRESENTATIVE NEUMAN expressed a willingness to have proposed
AS 45.27.230 removed.
REPRESENTATIVE GRUENBERG offered his understanding that
bankruptcy law doesn't allow one creditor to be treated
differently from another creditor.
REPRESENTATIVE SAMUELS disagreed.
2:09:13 PM
CHAIR RAMRAS made a motion to adopt Amendment 2, to delete
proposed AS 45.27.230 from page 4, lines 5-14. There being no
objection, Amendment 2 was adopted.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.240 -
Delivery of products in reasonable quantities - and asked
whether the term, "reasonable quantities" has already been
defined, who would determine what constitutes a reasonable
quantity, or whether it is a common term.
CHAIR RAMRAS posed a scenario in which a dealer orders four of a
product and then sells them before they even arrive. He
indicated that he doesn't expect that term to cause a problem.
MR. SNIFFEN, in response to a question, stated that he is not
aware of a broader interpretation of the term, "reasonable
quantity", and characterized Chair Ramras's scenario as
identifying that term fairly accurately.
REPRESENTATIVE GRUENBERG argued that that term will be the
subject of litigation, particularly given the difficulties in
shipping items into and around Alaska.
MR. COMPEAU pointed out that proposed AS 45.27.240 also provides
an exception to its mandate when the delay, refusal, or failure
to deliver products in reasonable quantities is beyond the
control of the manufacturer, the distributor, or a person
related to either. No one can predict which items will sell
well, and dealers simply want the opportunity to receive the
products that are in demand.
REPRESENTATIVE DAHLSTROM concurred, and relayed her own
experience in purchasing a four-wheeler with limited color
options. She noted that she was not able to purchase one in the
color she wanted, because those vehicles had already been sold.
REPRESENTATIVE GRUENBERG surmised that the dealer could use this
provision to threaten the manufacturer with litigation if the
dealer is not given priority with regard to the next shipment.
REPRESENTATIVE COGHILL opined that all of proposed AS 45.27.240
is problematic, not just the term, "reasonable quantities",
adding that as currently written, proposed AS 45.27.240 puts
pressure on the manufacturers to produce.
REPRESENTATIVE GRUENBERG concurred, and suggested that proposed
AS 45.27.240 may need to be altered a bit.
REPRESENTATIVE HOLMES, with regard to the aforementioned
exception, observed that production amount could be interpreted
to be within the control of the manufacturer. She too suggested
that this provision should be altered to take that into
consideration.
CHAIR RAMRAS concurred, and recommended that the sponsor should
consider addressing that issue as the bill continues through the
process.
2:15:33 PM
REPRESENTATIVE HOLMES referred to proposed AS 45.27.250 -
Selection of delivery method - and asked who would pay for the
shipping, given that under this provision the dealer is
authorized to select the shipping method and carrier.
REPRESENTATIVE GRUENBERG surmised that the manufacturer covers
the cost of shipping the products to the dealer. He offered his
understanding that another provision of the bill stipulates that
shipping on returned items is paid for by the dealer.
REPRESENTATIVE NEUMAN noted that the intent of proposed AS
45.27.250 is to allow the dealer to select what he/she considers
to be the best method for shipping, since a manufacturer might
not be aware of any local methods of shipping goods
inexpensively; this provision should keep costs down for the
consumer.
REPRESENTATIVE HOLMES pointed out, though, that proposed AS
45.27.250 doesn't actually stipulate that; instead, it simply
says that the manufacturer may not refuse to allow the dealer to
select the method and carrier. She again asked who is required
to cover those shipping expenses. For example, a dealer may
choose overnight express shipping if he/she is not required to
cover the shipping charges. In other words, is the person who
is not paying the shipping bill getting to select the method of
shipping?
REPRESENTATIVE NEUMAN offered his understanding that who pays
for shipping depends on the quantity being purchased, and that
the manufacturer/distributor and dealer generally work out such
issues via the agreement; proposed 45.27.250 merely provides a
default when the agreement doesn't speak specifically speak to
method and carrier of delivery.
REPRESENTATIVE HOLMES indicated that that still doesn't answer
her question.
2:19:54 PM
CHAIR RAMRAS referred to a letter dated February 13, 2007, from
Kathy Van Kleeck, of the Specialty Vehicle Institute of America
(SVIA), that with regard to proposed AS 45.27.250, read:
We are not aware of any other state statute providing
that a dealer can dictate the method and carrier for
product deliver. Manufacturers have an established
delivery system and using another carrier or method
will raise costs, not only for delivery itself, but
also in manpower costs for administering different
systems.
REPRESENTATIVE SAMUELS opined that a manufacturer shipping a
large quantity of snowmobiles would obtain a break in the
shipping costs, and the dealer may not know the shipping cost
per unit because that type of information is proprietary and the
manufacturer is not required to share that information with the
dealer.
MR. COMPEAU said manufacturers generally sign contracts with
specific carriers to ship most of their products. He surmised
that the dealer would be responsible for the shipping costs.
REPRESENTATIVE SAMUELS posed a scenario in which a distribution
hub in Anchorage ships products to a dealer located in Bethel.
He opined the dealer may have options for better shipping rates
with specific carriers since he/she would have forged
relationships with local shippers.
MR. COMPEAU explained that most manufacturers ship to a hub and
then the dealers have to arrange for shipping from the hub to
points in rural Alaska.
REPRESENTATIVE GRUENBERG said he doesn't see anything in the
bill that would preclude the manufacturer, as the drafter of a
contract of adhesion, from requiring the dealer to waive the
protections outlined in HB 303.
REPRESENTATIVE NEUMAN offered to work with Representative
Gruenberg on that issue, and acknowledged that addressing that
point might improve the bill.
2:25:07 PM
REPRESENTATIVE HOLMES noted that proposed AS 45.27.800 reads,
"If a provision in an agreement violates this chapter, the
provision is not enforceable".
REPRESENTATIVE GRUENBERG pointed out that including a waiver in
the agreement may not be considered a violation of AS 45.27.
REPRESENTATIVE COGHILL offered that in his experience, some
manufacturers will only ship by highway methods and will not use
shippers that do ship to Alaska, since Alaska is not part of the
contiguous United States. He surmised that he appreciates the
dealer having the option to select the delivery method in order
to provide better service to customers.
REPRESENTATIVE HOLMES said she would like to see this issue
addressed at some point, but she does not yet have a specific
amendment in mind unless it would be to change the provision
such that it would instead simply create a duty for the parties
to consult with each other on this issue.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.260 -
Product damage responsibility - and expressed concern that a
potential loophole may exist in that under subsection (c), a
dealer is responsible for damage to a product after it is
accepted from the carrier, whereas under subsection (d), the
dealer is allowed 10 business days after the product is
delivered to refuse to accept the product. She posed a scenario
in which the product arrives at the shop and is then damaged by
the dealer's forklift, but the dealer, under subsection (d),
then refuses to accept the product even though he/she is the one
responsible for the damage.
CHAIR RAMRAS noted that his business once received a shipment of
63 televisions, 48 of which needed repair. He relayed that it
took 10 days to obtain the return authorization (RA). However,
the manufacturer elected to send a representative to pick up the
entire shipment of 63 televisions rather than repair the 48
damaged television sets. He surmised that the 10 days reflected
in proposed AS 45.27.260(d) would allow for transactions of that
type to occur.
REPRESENTATIVE HOLMES said she does not have a problem with the
10-day provision remaining in the bill, so long as the
manufacturers are not held responsible for damage that occurs
once the products are in the dealer's possession.
2:29:13 PM
CHAIR RAMRAS noted that the last sentence in subsection (c)
says, "An authorized dealer accepts a product when the
authorized dealer signs a delivery receipt for the product." He
said he assumes that means that once a dealer accepts the
product, then the dealer has essentially purchased the product.
REPRESENTATIVE HOLMES concurred, but maintained that subsection
(d) creates an ambiguity in that regard because the dealer
appears to have an additional 10 days in which to reject the
product.
CHAIR RAMRAS suggested deleting subsection (d).
REPRESENTATIVE GRUENBERG argued against doing so at this time,
and suggested instead that the next committee of referral could
examine that provision.
REPRESENTATIVE GRUENBERG pointed out that the dealer is simply
signing receipt of the box the product is being delivered in,
[and may not know whether the product is damaged until the
shipment is later opened].
REPRESENTATIVE NEUMAN concurred.
REPRESENTATIVE HOLMES referred to proposed 45.27.300 -
Manufacturer or distributor mandatory repurchase - and expressed
concern that it would allow a dealer to make bad purchasing
decisions at no cost to himself/herself. Furthermore proposed
AS 45.27.340 stipulates that the amount of repurchase be based
on the dealer's landed cost, which, she surmised, includes fees
for handling and storing products.
REPRESENTATIVE DAHLSTROM asked how often products are sold back
to the manufacturer. She relayed that she appreciates being
able to buy "last year's model" at a marked down price.
MR. COMPEAU relayed that a repurchase situation might occur if
the manufacturer has overloaded the dealer with more product
than he/she can sell, and that in those instances, the
manufacturer would typically find another dealer to take control
of the excess product. It would be rare, he opined, for the
dealer to ship the excess product back to the manufacturer.
REPRESENTATIVE COGHILL posed a scenario in which a dealer
provides notice to the manufacturer, as provided under proposed
AS 45.27.300, and subsequently files for bankruptcy. He then
referred to the language on page 5, line 17-18, which in part
read, "manufacturer or distributor shall, at a minimum,
repurchase from the authorized dealer's inventory", and
expressed concern that the word, "shall" and the words, "at a
minimum" conflict with each other. He suggested that the words,
"at a minimum" should be removed.
2:33:47 PM
CHAIR RAMRAS made a motion to adopt Amendment 3, to delete from
page 3, line 17, the words "[,] at a minimum,". There being no
objection, Amendment 3 was adopted.
REPRESENTATIVE GRUENBERG suggested that a review of the
interplay between HB 303 and the current bankruptcy law should
also be undertaken.
REPRESENTATIVE HOLMES expressed a desire to ensure that HB 303,
in addition to protecting consumers and [dealers] from over-
reaching manufacturers and distributors, also provides
protections for manufacturers and distributors from unscrupulous
dealers.
CHAIR RAMRAS remarked, "The bill overreaches."
REPRESENTATIVE HOLMES suggested that under the repurchase
provisions of the bill, an unscrupulous dealer, for example,
could have a manufacturer send a lot of product and then require
the manufacture to buy it all back and pay all the shipping,
handling, and storage costs.
REPRESENTATIVE GRUENBERG surmised that manufactures/distributors
would probably like members to review the term, "landed cost" as
well to ensure that it isn't defined too broadly in the bill.
2:36:28 PM
REPRESENTATIVE SAMUELS expressed concern that HB 303 would allow
a dealer to over order products every year without being
responsible for the cost of doing so.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.330 -
Failure to repurchase - and noted that the term, "inventory
value" as used on page 6, line 14, is not defined elsewhere in
HB 303. She asked whether this is a common term or if it is
defined in other statutes.
REPRESENTATIVE NEUMAN offered his belief that they could
formulate a description of that term, conceptually, right now.
CHAIR RAMRAS suggested instead that that term be defined by the
next committee of referral.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.340, and
offered her view that the definition of "landed cost" - seems to
allow the dealer the discretion to decide what costs are
included and how high they will be; the definition of "landed
cost" - located on page 12, lines 21-24 - reads:
(9) "landed cost" means the total cost of a product delivered
at a given location, including the initial authorized dealer
invoice price and any freight, transportation, flooring
expense, interest expense, authorized dealer preparation cost,
assembly cost, and reasonable handling cost;
REPRESENTATIVE HOLMES referred to proposed AS 45 27.400 -
Warranty provided - and characterized it as awkwardly worded.
REPRESENTATIVE GRUENBERG referred to proposed AS 45.27.350 -
Carrier selection and costs - and suggested that members compare
that to the language of proposed AS 45.27.250 - Selection of
delivery method. Proposed AS 45.27.350 outlines who is
responsible for the transportation and storage costs, whereas
proposed AS 45.27.259 does not. He opined that the party who
gets to select the transportation/delivery method and carrier
should also be required to pay the transportation and storage
costs. In this way, HB 303 would be treating the parties
equitably.
CHAIR RAMRAS acknowledged that point.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.410 -
Defective products - and indicated that a provision that
requires the manufacturer to replace the entire product when an
original factory part is not available to complete the warranty
repair seems unreasonable in instances where the part is small
or nonessential.
MR. COMPEAU explained that generally, when the damaged part is a
component of the boat, for example, only the damaged part would
be returned. However, if the hull on that boat has a structural
defect that can't be repaired, the entire boat needs to be
returned to the manufacturer.
REPRESENTATIVE HOLMES surmised that for the most part, most
consumers would not want to return their whole boat if just a
small part is defective. She suggested, though, that this issue
be considered further to ensure that nothing is overlooked.
Referring to proposed AS 47.27.430 - Timely warranty service and
claims - she said she was not certain who would determine what
constitutes "timely", or about using the word "timely" in
statute.
MR. SNIFFEN said he was not aware of other statutes that use
that particular phrase.
2:43:00 PM
CHAIR RAMRAS made a motion to adopt Amendment 4, to delete
proposed 45.27.430 from page 7, lines 25-30, and immediately
announced that Amendment 4 was adopted.
REPRESENTATIVE LYNN questioned whether they should instead just
delete the word, "timely" [where it appears in proposed AS
45.27.430].
REPRESENTATIVE HOLMES and LYNN objected to the motion to adopt
Amendment 4.
REPRESENTATIVE NEUMAN expressed a preference for either deleting
only the word, "timely" from proposed AS 45.27.430, or else
defining that term in the bill. He explained that consumers
generally want to know when the warranty work will be completed.
CHAIR RAMRAS characterized HB 303 as extraordinarily top heavy.
CHAIR RAMRAS withdrew Amendment 4. He noted that the matter
could again be addressed in the bill's next committee of
referral.
2:44:28 PM
REPRESENTATIVE HOLMES referred to proposed AS 45.27.440(d) -
Basis for reimbursements - and noted that the rate for
reimbursement of product parts, should a manufacturer's full
suggested retail price not exist, is 1.5 times the dealer's
landed cost. She expressed concern with that language in light
of the discussion thus far regarding the definition of the term,
"landed cost".
CHAIR RAMRAS questioned whether subsection (d) should be
deleted.
REPRESENTATIVE COGHILL made a motion to adopt Amendment 5, to
delete from page 8, lines 16-18, the sentence, "If a
manufacturer's full suggested retail price does not exist, the
reimbursement shall be calculated at 1.5 times the authorized
dealer's landed cost." There being no objection, Amendment 5
was adopted.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.450 -
Shipping costs for returned items - and expressed concern with
the language in subsection (a) that reads, "A manufacturer or
distributor shall pay for any costs incurred by the authorized
dealer, plus 25 percent of the normal authorized dealer's cost
as a handling fee". She said she doesn't know whether that is
the correct amount.
CHAIR RAMRAS remarked, "It seems like we're setting shop
policy."
REPRESENTATIVE HOLMES concurred.
MR. COMPEAU said that the suggested industry standard for the
cost of handling and stocking parts ranges between 18 and 23
percent.
2:46:55 PM
CHAIR RAMRAS made a motion to adopt Conceptual Amendment 6, to
delete proposed AS 45.27.450(a) from page 8, lines 19-23. There
being no objection, Conceptual Amendment 6 was adopted.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.480 -
Performance of warranty service work - and expressed concern
that it doesn't specify what is meant by the term, "readily
available".
CHAIR RAMRAS suggested that that issue be addressed in the
bill's next committee of referral.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.500 -
Warranty claim disapproval, and expressed concern that it is not
clear when the 30-day period outlined therein would start.
CHAIR RAMRAS suggested that that issue be addressed in the
bill's next committee of referral.
REPRESENTATIVE GRUENBERG offered his understanding that the
intent is to have the 30-day period begin upon receipt of the
claim.
2:49:26 PM
REPRESENTATIVE GRUENBERG made a motion to adopt Amendment 7,
such that the words, "after receipt of the claim by the
manufacturer or distributor" would be inserted on page 9, line
22, after the words, "30 days". There being no objection,
Amendment 7 was adopted.
REPRESENTATIVE HOLMES asked Mr. Sniffen whether the language of
proposed AS 45.27.600, which addresses liability resulting from
an audit, is already part of [Alaska's] UCC.
MR. SNIFFEN said he doesn't belief that the specific liability
provisions in proposed AS 45.27.600 are covered in [Alaska's]
UCC. The biggest concern with this provision, he offered, is
that it changes the statute of limitations, from three years to
two years, for a manufacturer to bring a claim against a dealer
under a contract.
CHAIR RAMRAS suggested that that issue be addressed in the
bill's next committee of referral.
2:51:09 PM
REPRESENTATIVE HOLMES referred to proposed AS 45.27.610 -
Competition with authorized dealer - and questioned its meaning
and whether it could cause problems.
REPRESENTATIVE SAMUELS offered his understanding that it means
that a manufacturer/distributor cannot compete with an
authorized dealer [of the same line, brand, model, or make of
product].
REPRESENTATIVE GRUENBERG pointed out that a
manufacturer/distributor would not be competing with a dealer
unless they were established in the same area.
REPRESENTATIVE HOLMES asked whether online sales would be viewed
as competition.
REPRESENTATIVE GRUENBERG said HB 303 does not address online
sales.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.630 -
Advertizing - and asked whether other statutes already prohibit
false or misleading advertising.
MR. SNIFFEN said that the Alaska Unfair Trade Practices and
Consumer Protection Act already prohibits such conduct, and
ventured that it causes no harm to have similar language in
other provisions of statute.
REPRESENTATIVE HOLMES suggested, then, that it is not necessary
to include proposed AS 45.27.630 in HB 303.
REPRESENTATIVE GRUENBERG, offering his recollection that under
the bill, the penalty for such conduct is a class B misdemeanor,
asked what the penalty is for a violation of the Alaska Unfair
Trade Practices and Consumer Protection Act.
MR. SNIFFEN said that for state-enforcement actions, the
penalties range between $1,000 and $25,000 per violation, and if
an individual brings an action, he/she could be awarded treble
damages or $500, whichever is less, plus punitive damages and
all fees and costs. He noted that the Alaska Unfair Trade
Practices and Consumer Protection Act doesn't contain any
criminal provisions.
REPRESENTATIVE GRUENBERG suggested leaving proposed AS 45.27.630
as is since then the bill would allow for both civil and
criminal actions.
REPRESENTATIVE HOLMES agreed to let that issue be addressed
further in the bill's next committee of referral.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.640 -
Required posting - and asked whether a notice should also be
posted informing consumers that warranty work would not be
performed by a factory-certified or factory-trained technician.
REPRESENTATIVE GRUENBERG recalled that the legislature
previously amended the state's automobile statutes to require
the posting of information regarding whether those who performed
repairs were paid on commission.
2:56:54 PM
REPRESENTATIVE GRUENBERG made a motion to adopt Conceptual
Amendment 8, "that similar language from the automobile chapter
be added here, that if they are paid on a commission basis
[that] that also be included in the notice."
REPRESENTATIVE GRUENBERG, in response to a question, indicated
that the aforementioned notice would be posted in the shop.
CHAIR RAMRAS objected for the purpose of discussion.
MR. SNIFFEN relayed that Representative Gruenberg was referring
to language in AS 45.25.530, which states that motor vehicle
service operations whose employees receive a commission must
post a conspicuous sign to inform consumers of that fact. He
surmised that Conceptual Amendment 8 would add similar language
to HB 303.
CHAIR RAMRAS withdrew his objection. Noting that there were no
further objections, announced that Conceptual Amendment 8 was
adopted.
CHAIR RAMRAS remarked that the bill sponsor still has a great
deal of work to do on the bill.
REPRESENTATIVE HOLMES referred to proposed AS 45.27.810 -
Manufacturer and distributor liability - and asked whether
existing law already addresses this issue. She questioned
whether it is appropriate to retain the language of proposed AS
45.27.810(b)(1) requires the manufacturer/distributor to hold
harmless and indemnify the dealer for damages arising out of
alleged acts of the manufacturer/distributor that relate to the
dealer's sale or other handling of the product.
MR. SNIFFEN characterized that as an unusual requirement. He
said he is not certain that similar indemnification language
exists elsewhere in statute, and offered to work with the bill's
sponsor to address this issue.
3:00:28 PM
REPRESENTATIVE HOLMES referred to proposed AS 45.27.820 - Civil
penalty - and noted that although this provision in CSHB
303(L&C) says, "Notwithstanding AS 45.50.551, a person who
violates this chapter is liable to the state for a civil fine of
not more than $5,000 for each day the violation continues", this
provision in Version K now says, "In addition to the penalties
allowed under AS 45.50.471 - 45.50.561, a person who violates
this chapter is liable to the state for a civil fine of $5,000
for each day the violation continues". She asked why this
provision was changed in this manner, particularly given the
penalties already provided for in the Alaska Unfair Trade
Practices and Consumer Protection Act.
REPRESENTATIVE NEUMAN said that that change came at Mr.
Sniffen's recommendation.
MR. SNIFFEN said that the change from "Notwithstanding AS
45.50.551" to "In addition to the penalties allowed under AS
45.50.471 - 45.27.561" will allow the state to also enforce the
provisions under the Alaska Unfair Trade Practices and Consumer
Protection Act. He relayed, though, that he'd not suggested the
change from "a civil fine of not more than $5,000" to "a civil
fine of $5,000". He said that he thought the penalties under
the Alaska Unfair Trade Practices and Consumer Protection Act
were sufficient, but if the intent is to make violations of HB
303 more egregious, than additional penalties might be in order.
CHAIR RAMRAS characterized the $5,000 penalty as egregious.
MR. SNIFFEN, in response to comments and questions, offered his
interpretation that the term, "per violation" means per
transaction. Under the bill, the civil penalty could end up
being very high, depending on the conduct.
CHAIR RAMRAS, referring to proposed AS 43.27.830, pointed out
that the aforementioned letter by the SVIA indicates that it
feels that creating a criminal penalty is an unreasonably harsh
consequence for what amounts to a mere business dispute. He
questioned whether it is appropriate to make a violation of
proposed AS 45.27 a class B misdemeanor.
MR. SNIFFEN said it is highly unusual to impose criminal
penalties for "these kinds of violations," and the "anti-trust
statute" is the only other consumer-related statute that imposes
criminal penalties for "this kind of conduct."
3:03:54 PM
CHAIR RAMRAS made a motion to adopt Amendment 9, to delete
proposed AS 47.27.830 from page 11, lines 11-12. There being no
objection, Amendment 9 was adopted.
CHAIR RAMRAS made a motion to adopt Conceptual Amendment 10, "to
adjust the civil penalties" in proposed AS 45.27.820.
MR. SNIFFEN suggested that Conceptual Amendment 10 could insert
the language, "A violation of provisions of this Act are
considered a violation of AS 45.50.471 - 45.50.561."
CHAIR RAMRAS, after ascertaining that there were no objections,
announced that Conceptual Amendment 10 was adopted.
REPRESENTATIVE HOLMES relayed that she still has concern over
the definition of landed cost.
CHAIR RAMRAS suggested to Representative Neuman that perhaps HB
303 should be divided into separate pieces of legislation, and
characterized the bill as a "very dense, obtuse, ambitious
effort that will have a very difficult time" passing if its
focus is not narrowed down.
3:08:54 PM
REPRESENTATIVE SAMUELS moved to report the proposed committee
substitute (CS) for HB 303, Version 25-LS1183\K, Bannister,
2/13/08, as amended, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 303(JUD) was reported from the House
Judiciary Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 3:09 p.m.
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